Business Context and Reporting Period
Company: Black Stone Minerals, L.P. (BSM)
Filing Type: Form 10-Q (Unaudited)
Reporting Period: Quarter and nine months ended September 30, 2025
Business Overview: BSM is a publicly traded Delaware limited partnership owning oil and natural gas mineral and royalty interests across 41 U.S. states. The Partnership operates in a single segment, generating revenue from hydrocarbon sales and lease bonuses. As of September 30, 2025, the Partnership held 211.9 million common units and 14.7 million Series B cumulative convertible preferred units.
Key Financial Metrics
| Metric (in thousands, except per unit) | Q3 2025 | Q3 2024 | 9M 2025 | 9M 2024 |
|---|---|---|---|---|
| Total Revenue | $132,470 | $134,856 | $351,216 | $349,973 |
| Net Income | $91,729 | $92,731 | $227,705 | $224,980 |
| Net Income Attributable to Common Units | $84,363 | $85,365 | $205,606 | $202,881 |
| Diluted Earnings Per Unit | $0.40 | $0.41 | $0.97 | $0.96 |
| Operating Cash Flow (9M) | $245,067 | $298,087 | $245,067 | $298,087 |
| Adjusted EBITDA (9M) | $252,594 | $290,806 | $252,594 | $290,806 |
| Distributable Cash Flow (9M) | $225,229 | $267,532 | $225,229 | $267,532 |
| Cash and Cash Equivalents (End of Period) | $2,864 | $2,519 | $2,864 | $2,519 |
| Restricted Cash (End of Period) | $3,304 | $0 | $3,304 | $0 |
| Total Debt (Credit Facility) | $95,000 | $25,000 | $95,000 | $25,000 |
| Available Borrowing Capacity | $280,000 | $350,000 | $280,000 | $350,000 |
Material Changes vs. Prior Period
- Revenue Composition: Total revenue for Q3 2025 decreased 1.8% year-over-year, driven by a $6.9 million decline in oil sales due to lower realized prices ($62.60/Bbl vs. $73.15/Bbl) and a $4.4 million decrease in derivative gains. These were partially offset by a $6.0 million increase in natural gas sales (higher realized prices of $2.96/Mcf) and a $2.9 million increase in lease bonus income.
- Production Volumes: For the nine months ended September 30, 2025, total production equivalents decreased 10.2% to 9,678 MBoe. Oil production fell 9.5% and natural gas production fell 10.5%, primarily due to reduced royalty volumes in the Permian Basin and Haynesville/Bossier plays.
- Debt Utilization: Borrowings under the Credit Facility increased significantly from $25.0 million at year-end 2024 to $95.0 million at September 30, 2025, resulting in a 235% increase in quarterly interest expense.
- Acquisitions: The Partnership acquired mineral and royalty interests for $65.7 million during the first nine months of 2025, funded by $58.3 million in cash and $7.4 million in equity issuance.
Guidance, Outlook, and Risks
- Commodity Hedging: As of September 30, 2025, the Partnership has hedged a portion of expected future volumes through 2027. Oil swaps cover volumes at weighted average prices ranging from $59.90 to $71.22 per barrel. Natural gas swaps cover volumes at prices ranging from $3.45 to $3.97 per MMBtu.
- Development Activity: Development continues in the Shelby Trough (East Texas) and Haynesville (Louisiana). Aethon Energy is operating one rig in the Shelby Trough with 15 wells expected in the current program year. In the Permian Basin, a large operator has spud 34 gross wells on BSM acreage.
- Capital Allocation: The Board approved a distribution of $0.30 per common unit for Q3 2025. The Partnership maintains a $150 million unit repurchase program but made no repurchases in the first nine months of 2025.
- Leadership Changes: A leadership succession plan is effective January 1, 2026. Thomas Carter will become Executive Chairman, while Fowler Carter and Taylor DeWalch will succeed him as co-CEOs. Chris Bonner will become CFO.
- Risks: Key risks include volatility in oil and natural gas prices, reliance on third-party operators for drilling activity, and the impact of trade policies and tariffs on global demand. The Partnership is subject to financial covenants requiring a current ratio of at least 1.0:1.0 and a debt-to-EBITDAX ratio not exceeding 3.5:1.0.
Investor Verification Checklist
- Debt Covenants: Verify continued compliance with the Credit Facility covenants, specifically the debt-to-EBITDAX ratio, given the increase in outstanding borrowings to $95 million.
- Production Trends: Monitor the sustainability of production declines in the Permian and Haynesville plays and the ramp-up of new wells in the Shelby Trough and Permian Basin.
- Commodity Exposure: Review the effectiveness of the hedging program against current market prices, noting the mix of fixed-price swaps for oil and natural gas extending into 2027.
- Preferred Unit Obligations: Confirm the impact of the 9.8% distribution rate on Series B preferred units on cash available for common unitholders.
- Acquisition Integration: Assess the accretive nature of the $65.7 million in acquisitions completed in the first nine months of 2025.